Enforcing a Settlement Agreement
This brief article focusses on how a party may enforce a settlement agreement. However, the principles cited here are largely applicable whether one is enforcing a settlement or any other type of deal.
The Alberta Court of Appeal in the recent Buterman decision confirmed that parties may enforce on a settlement deal before they complete and execute the documentation evidencing that settlement. This is consistent with the principle that generally contracts, whether relating to settlement or otherwise, may be enforceable even if the parties do not reduce their agreements to a written form.
The essential question is whether the parties have reached an agreement on all essential terms. This issue is inherently fact-specific, but certain terms, like the good/service and price, need to be agreed upon. That said, even a term like the price does not need to be specifically stated. The parties, instead, could agree to a mechanism to determine what price will be. Courts have found that such terms would be of sufficient certainty to found an enforceable contract, assuming that all other essential terms have enough certainty.
Buterman raises an important point that parties need to be aware of once they work out the essential terms. One party may tender to its counterpart whatever form of settlement documentation they think appropriate. If the form is not accepted by the counterpart, then there must be further discussion. Neither party may walk away from the deal unless the other party has demonstrated an unwillingness to be bound by the terms of the agreement by insisting on terms which were not agreed upon or are not reasonably implied in the circumstances.
The Court, when interpreting the contract, will use all of the established principles of contractual interpretation, including regard to the circumstances that surrounded the formation of the agreement. Such circumstances include the commercial purpose of the contract, the genesis of the transaction, the background and the context.
Invitation for Discussion:
Our litigation lawyers are skilled in litigation strategy and enforcement. If you would like to discuss this blog in greater detail, or any other business litigation matter, please do not hesitate to contact Mohamed Amery or one of the lawyers in the Business Litigation Group at Shea Nerland LLP.
Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.